Zoom Video Communications (ZM) shares surged past $200 on June 1 to end the day with a 13% gain. The latest price action came as a result of the optimism surrounding the first-quarter earnings of the company which would be released after the market close on June 2.
Investors never really paid attention to Zoom before the pandemic, but the company emerged as the go-to video conferencing platform for stay-at-home professionals and students in the last few months. This virus-proof nature of the company has helped shares soar 200% in 2020 so far.
Even as shares continue to rise, some analysts are questioning the ability of Zoom to remain relevant in the long run as billion-dollar tech giants such as Facebook Inc. (FB) and Alphabet Inc. (GOOG) have unveiled plans to grab market share in the booming video conferencing industry.
Zoom Has A History Of Beating Estimates
Empirical evidence suggests that Zoom is likely to beat estimates for the first quarter. Since its IPO in April 2019, Zoom has beaten earnings and revenue estimates 100% of the time, and the same thing could happen later today as well. However, this is not a guarantee for a surge in the stock price. For instance, shares dropped by 10% following a strong earnings report in the previous quarter.
Latest Analyst Actions
Rosenblatt boosted its target price for Zoom from $95 to $150 on June 1, and the research firm now has the highest price target among Wall Street analysts for Zoom. However, even this revised target represents a downside of over 25% from the current market price of $204.
Even though daily active users have surged since March, some analysts have cast doubt over the ability of Zoom to monetize these users as the majority are non-paying subscribers who do not plan to pay for a video communication platform ever. The reopening of the economy, in any case, will lead to a decline in active users as well. Morgan Stanley analyst Meta Marshall recently wrote, “In order for us to get more positive on Zoom, we would need to see evidence that the monetization is higher than expected, meaning the installed base to sell additional services into is larger.”
Analysts unanimously agree that Zoom is overvalued from many perspectives.
Profit-Taking Seems To Be A Rational Decision
Zoom has many things going right for them, but at an EV/sales multiple of 80, shares are overvalued. As the global economy slowly returns to normalcy, Zoom will see a gradual decline in its daily active users, which would not be taken lightly by market participants. The company has a plethora of security and privacy issues to address as well. Booking profits now and waiting for a better opportunity seems to be the rational move.
In an abrupt and unprecedented manner, the world witnessed a mass halt to global activities due to the pandemic. Governments and central banks rushed in to intervene and support the global economy with unconventional measures to cushion the impact of the coronavirus on their economies and ease market strains.
As the virus spread quickly across the globe, the world forcing employers and employees to work remotely and rethink how to operate in a new ‘virtual reality’. Similarly, investors are faced with a new normal and are at an inflection point where there is a pressing need to reshape their investing strategies.
The oil price war is over for now and the OPEC+ group has also agreed to a historic production cut in early April; though . Aa little too late considering how the situation unfolded during the month. Oil demand took the biggest hit seen in years at a time where production was reaching new highs.
The world is running out of spare room to store the fast-expanding glut that the pandemic has created. The damage initially caused by the price war was irreversible during such pandemic. The lack of storage capacity triggered a big plunge in crude oil prices.
Crude oil futures markets were in chaos, triggered by the inability of investors or traders to take on physical deliveries of oil barrels. The storage problem is so dire that investors or traders holding oil contracts are willing to sell their contracts at a loss, causing crude oil futures to turn negative for the first time in history.
A situation of more sellers than buyers.
On April 2020, WTI futures for May delivery traded at around negative 37 for the first time ever, reflecting the urgency of sellers to offload their contracts to avoid taking physical deliveries given the pandemic-induced circumstances.
What to expect in the coming months?
There is no quick fix for rebalancing the oil market. In such volatile markets, it is hard to predict what will happen with the June contract as the storage capacity will remain a primary source of concern.
Oil future prices took another blow when one of the largest oil funds, the United States Oil (USO), filed an SEC filing and revised its investment in oil future contracts to concentrate on contracts that are further out in the future.
Crude oil prices have remained under heavy selling pressure throughout the month. The near-term outlook for the oil market remains grim but investors are hopeful some recovery will take place when:
Production cuts will slow down the speed at which storage tanks are being filled; and
Major economies will ease lockdowns and activities will gradually pick up.
In the last few days, WTI for June delivery lost more than 15% and is trading at $14.26 a barrel while Brent recovered from earlier losses for June settlement and is trading at $21.42 a barrel.
The International Monetary Fund (IMF) has predicted in its 2020 World Economic Outlook that the economic impact of the COVID-19 pandemic might result in the “worst recession since the Great Depression”. The IMF expects the world economy to contract by 3% in 2020 due to the magnitude and speed of the collapse in activity following the various forms of lockdown seen across the globe.
Attention was on the GDP figures of the world’s two largest economies!
Earlier this month, China reported a deep contraction of 6.8% in GDP in the first quarter. It was not surprising given that China exercised strict lockdown measures and put a halt to activities throughout most of the quarter.
China has slowly resumed activities since the beginning of the month as the worst of the pandemic appears to be over. Manufacturing and trade data has been more upbeat which has risen expectations of a gradual return to normal if China avoids another wave of the virus.
Investors will be ending the month with the US GDP report that will show the first wave of the impact of the pandemic. After more than a decade of expansion, the US economy was expected to contract by 4% with a steeper contraction in the second quarter.
As of writing, the preliminary figures show a worse-than-expected contraction of 4.8%, which is the first sharpest decline since the Great Recession.
The figures echoed the IMF warnings!
Earnings results were widely expected to highlight the pain inflicted by the coronavirus-induced crisis. Even though investors were expecting a tough earnings season with withdrawn forecasts, confusion and uncertainties about the 2020 outlook, the quarterly results are also meant to reveal how certain industries are affected by the virus and how those insulated from the virus are managing the pandemic.
Everything about the pandemic is unpredictable and therefore, companies in every sector are facing the challenges to communicate their guidance. Companies within certain sectors will perform worse than others.
The earnings season kickstarted with major US banks. As widely expected, banks like JP Morgan, Wells Fargo, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley all reported a significant drop in profits. Overall, the banks made significant provisions for credit losses and saw major declines in asset management revenues.
Banks like Goldman Sachs and Morgan Stanley have flared better and their share price is currently up by 15% or more.
Our attention move to the big tech giants like Alphabet, Facebook and Netflix which have been reclassified to the communications sector in the last few years.
Netflix was among the first few to report its quarterly results. The company reported a $5.8B in revenue with a year-on-year growth of 27.6%. The number of subscribers came above estimates and more than double its target with 15.77 million paid subscribers. The substantial growth came in March when the lockdown and social distancing measures forced many more households to join the TV and movie-streaming service.
However, the company warned that revenue and growth might decline mostly due to probable lift of the confinement measures, a stronger US dollar that is impacting international revenue growth and the lack of high-quality content following the pause in production. Its share price reached a high of around $440, but as of writing, it is currently trading at $411.
Alphabet, Google’s parent company, issued its quarterly results after the bell on Tuesday. The company reported an increase of 13% in revenue for Q1 2020, compared to a 17% increase for the same quarter a year ago and earnings of $9.87 per share. Based on expectations, it was a miss on earnings. However, the company has performed well given the challenges and is cautiously optimistic tones for the second quarter. Alphabet’s share price rose by almost 9% on Wednesday.
Facebook – The social networking giant reported earnings of $4.9B or $17.10 per share for Q1 2020 compared to earnings of $2.43B or $0.85 per share in Q1 2019. The company doubled its earnings. Similarly to its peers, Facebook warned of the unprecedented uncertainty and withdrew its revenue guidance for the rest of the year. Its share price jumped by 6% to trade at $194.20.
Both Google and Facebook have seen a significant reduction in demand for advertising, but the companies still managed to stay massively profitable and adapt in a coronavirus-fueled environment.
Microsoft released strong results in the third quarter of its fiscal year 2020. Overall, COVID-19 has had a minimal net impact on total revenue. As people around the world shifted to work and learn from home, there was a significant increased in demand for Microsft’s Cloud business to support remote works and learning scenarios. Compared to the corresponding period of last fiscal year:
Revenue was $35.0 billion and increased 15%
Operating income was $13.0 billion and increased 25%
Net income was $10.8 billion and increased 22%
Diluted earnings per share were $1.40 and increased 23%
Microsoft did not only top revised COVID-19 estimates but also the earnings that were expected back in January before the coronavirus crisis.
All eyes will be on Apple Inc. which will report earnings on Thursday, April 30, 2020 after market close. Apple’s conference call to discuss second-quarter results will be held on the same say at 2:00 p.m. PT / 5:00 p.m. ET.
Unlike the consumer staples sector which includes companies that produce or sell essential products, consumer discretionary stocks are mostly companies that do not manufacture or sell essentials. The various forms of lockdowns have left many people without employment. For example, the US economy lost around 20 million jobs over the last few months. It took the US like a decade to add those jobs in the economy.
Amazon.com Inc has always stood out from the lot because of its status as a leading e-commerce retailer. Investors will closely watch its earnings reports for guidance. The company Amazon.com, Inc. will hold a conference call to discuss its first quarter 2020 financial results on April 30, 2020 at 2:30 p.m. PT/5:30 p.m. ET.
Worldwide sharp contractions in the manufacturing sectors, warnings of economic contraction and fears of a recession in the month of April have created panic and volatility in the financial markets.
A look at the All-Country World Index shows that global equities are poised for their biggest monthly gain since the Great Recession. The biggest driver is the unprecedented and unconventional actions by central banks combined with massive fiscal stimulus.
Global equities are surging even though economic data is painting a different picture.
Towards the end of the month, some positive developments on the novel coronavirus cases and the possibilities of earlier opening plans of certain major economies has driven markets higher. Mega-cap stocks like Microsoft, Amazon, Facebook and Google have also contributed to lifting sentiment and drove the rally while smaller-cap companies are bearing the brunt of the pandemic.
The Reopening Plans
There is still hope for the economy despite the tough circumstances. V-shaped or U-Shaped Recovery? New infections have slowed down but there is still no vaccine and economies are at risk of a new wave of infection.
A vaccine could have increased expectations of a swift recovery like a V-shaped immediate recovery in the third quarter or a U-shaped recovery with stability more towards the second half of the year.
However, at the moment, governments are easing lockdown restrictions and investors will be back to a New Normal to replace the current “normal”. The economy is trapped in an unusual type of recession created by the novel coronavirus.
The roadmap to recovery will be progressive and dependent on the governments approaches towards easing lockdowns. It will be different across the globe depending on how governments feel about the situation and the risk of a second wave of the virus.
The path to recovery will be a learning process given the unknown territory!
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First we had the FAANGs – Facebook, Apple, Amazon, Netflix, and Google. With Facebook and Netflix out of favor and Microsoft returning to good graces, we now have MAGA. Not the MAGA promoted by President Trump, but Microsoft, Apple, Google, Amazon.
Amid the broader stock market sell-off, these four tech giants aren’t doing so well, having erased $1.3 trillion in value since their February all-time closing highs.
During the current stock market rout, Microsoft has taken the biggest hit, down $405.2 billion. Apple has lost around $371.8, billion, while Alphabet (Google’s Parent) is down $311.1 billion. Amazon has dropped $239.4 billion.
Of the four tech titans, only Apple and Microsoft remain valued at over $1 trillion.
While the benchmark S&P 500 Index and blue chip Dow Jones Industrial Average have fallen more than 20% from their record highs, thereby entering a bear market, these four stocks have also made similar moves. Amazon, the best performer in the bunch, is down 20.8%. Apple is off its high by 25.4%, while Microsoft has plunged 26.9%. Alphabet (Google) is the worst performer, plummeting 29.3%.
Microsoft hasn’t been in the news lately, probably because it doesn’t own any stores. However, it was one of the first companies to warn about the coronavirus’ impact on its bottom-line. Three weeks ago Microsoft said it doesn’t expect the quarterly revenue guidance it previously provided for the segment that includes Windows.
Even before Microsoft disclosed trouble, Apple disclosed that it did not expect to reach its own quarterly revenue forecast because of lower iPhone supply globally and lower Chinese demand as a result of the coronavirus outbreak. On March 14, Apple said it was closing all stores outside of China until March 27 to reduce the spread of the virus.
Amazon warned it’s experiencing Prime delivery delays and running out of stock of popular household items amid the coronavirus outbreak.
The issues are a result of a “dramatic increase in the rate that people re shopping online,” Amazon said in a blog post that was updated Saturday. Some popular brands and items in the “household staples” categories were out of stock, while Amazon said some of its “delivery promises are longer than usual.” The issue markets a rare disruption to Amazon’s signature two-day and one-day Prime delivery service.
Alphabet’s Verily coronavirus site screening website for Silicon Valley residents went live on Sunday evening. By Monday it appeared to be overloaded and cannot currently offer appointments for screening, according to the website. The site, build by Google sister-company Verily, is supposed to offer people who live in San Mateo or Santa Clara counties and think they are experiencing COVID-19 symptoms a way to schedule a test.
Near-Term Outlook for MAGA
All four MAGA stocks are highly correlated with the benchmark S&P 500 Index, but given their different business models, it looks as if Amazon should outshine the rest. Consumers are still going to need products and if there are mass quarantines in the United States, these consumers will have to rely on the internet to place their orders.
Google is likely to be the worst performer in the bunch because it relies on small business advertising, which is expected to decline during the coronavirus crisis.
It turns out that yes! At least to some extent. Let’s start with the R-word index created by The Economist. It counts how many stories in the The Washington Post and The New York Times are using the word “recession” in a quarter. The idea behind the indicator is that economic downturn coincides with a surge in the frequency of the that scary world starting with R. The index surges when recessions are on the minds of people and the financial journalists who write articles about them. And, indeed, it has been pretty good at spotting economic turning points over the past three decades. As one see in the figure below, the R-word index signaled the start of recessions in America in 1990, 2001, and 2007.
Chart 1: The Economist’s R-word Index from Q1 1990 to Q4 2018.
Is it perfect indicator? Of course not! The R-word index is great, because it is instantly available. However, it emits recessionary signal just before the crises, so it is not the best leading indicator. And it sent a false warning in 1998. Moreover, the size of the spike in the early 1990s was much higher than during the previous recessions, although they were much more severe.
Another problem is that the gauge sometimes indicates recessions after they officially end, as the journalists go on babbling about the slump even when it’s over. This is the main limitation of the index: it does not measure the real economic activity but its perception in just two newspapers (however, Mark Doms and Norman Morin, in a paper “Consumer Sentiment, the Economy, and the News Media”, elaborated of The Economist’s R-word index, constructing indexes reflecting the number of articles about recession from 30 large newspapers, and they reached similar conclusions). If these two match each other, that’s perfect. But the perception can be distorted. Remember that the press loves to shock, as fear sells great.
Currently, the index is not flashing danger. However, the measure is on the rise. When the number surpasses 1,000, you might start to worry, having in mind all its shortcomings. You could then consider buying gold and sit comfortably in a chair. And admire the glow of bullion, instead of counting words in the newspaper.
We all know that the media cannot be trusted, right? So maybe instead of relying on financial journalists, we should simply ask Uncle Google? After all, instead of going to the doctor, you ask the Uncle how serious your symptoms are. Google is the dominant search engine, so its search term usage can provide a snapshot of current interests in economic issues, including recession. The idea is simple: if many people are entering the same economic search terms in the same period, this could reflect changing conditions, such as the onset of a recession.
So, let’s look at the chart below, which shows the gold prices and the popularity of query for “recession” in the United States from January 2004 to June 2019.
Chart 2: Searches in Google for “Recession” in the US from January 2004 to June 2019 (January 2008 = 100).
As one can see, the term gained the maximum popularity in January 2008, shortly after the official start of the Great Recession. Since then, the popularity receded but soared again after the collapse of the Lehman Brothers. Until recently, the index remained at a low level, but it surged the end of 2018. Currently (as of mid-June), it stays at 20, a level seen just before the last financial crisis. However, it has been in a downward trend in 2019, so although the jump from the end of the previous year is disturbing, there is no reason to panic yet. This indicator does not suggest an imminent U.S. recession.
However, although the index is timely, investors should remember its limitations. First of all, Google Trends data are available only from January 2004, so it covers only one economic crisis. Second, the spike in searches for “recession” occurred just when the US economy fell officially into recession, so it is not the best leading indicator.
What does it all mean for the gold market? Well, both The Economist’s R-word Index and the Google’s Recession Index have increased substantially from their through in mid-2017, which is worrisome and could spur some safe-haven demand for gold. However, both indices do not flash recessionary signals yet. Gold bulls will have to wait to unfold fully their wings, pardon, hooves.
All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
U.S. equity markets were quite busy after the cash market close on Thursday following the release of earnings reports from Google parent company Alphabet and Amazon. The mixed results helped soften the blow from yesterday’s sharp sell-off in the major U.S. stock indexes that was fueled by a jump in global yields after European Central Bank President Mario Draghi told reporters at a press conference the chances of a recession in the Euro Zone is still “pretty low.”
Shares of Google parent company Alphabet initially rose more than 9% after the company reported second-quarter earnings that beat estimates Thursday.
Additionally, the company’s board of directors approved a repurchase of up to an additional $25 billion of its Class C capital stock. On a call with analysts, CFO Ruth Porat said the capital would be used to support growth and acquisitions and investments.
Here are the highlights:
Earnings per share: $14.21 per share, ex-items, vs $11.30 per share expected, per Refinitiv survey of analysts.
Revenue: $38.94 billion, vs. $38.15 billion expected, per Refinitiv
Traffic acquisition costs: $7.24 billion, vs. $7.27 billion, according to StreetAccount
Paid clicks on Google properties from Q2 2018 to Q2 2019: +28%
Cost-per-click on Google properties from Q2 2018 to Q2 2019: -11%
Amazon Beat on Sales, Missed on Earnings
Amazon shares fell 2% after the close after reporting mixed results in its second-quarter earnings release on Thursday. The numbers failed to meet profit expectations while exceeding revenue forecasts.
The good news for investors is Amazon’s renewed investments into the company are paying off, driving sales growth at the expense of lower profit margins. On the negative side, the company gave third-quarter profit guidance that fell well-below street estimates.
Here are the highlights:
Earnings per share: $5.22 vs. $5.57, according to analysts surveyed by Refinitiv
Revenue: $63.4 billion vs. $62.5 billion, according to Refinitiv
Amazon Web Service: $8.38 billion vs $8.5 billion, according to analysts surveyed by FactSet
Amazon’s revenue jumped 20% from the year-ago period, a rebound from 16.8% in the first quarter, which was the slowest in four years.
At 03:52 GMT, Alphabet Inc. Class A shares are trading $1225.00, up $89.06 or +7.84% and Amazon.com, Inc. shares are trading $1941.15, down $32.67 or -1.66%.
Over the last 2 years, Alphabet has beaten EPS estimates 75% of the time and revenue estimates 100% of the time. Zack Investments report that Alphabet’s search market share (north of 90%) is a big positive, which along with its focus on innovation of its AI techniques, strategic acquisitions and Android OS should continue to generate strong cash flows for the company. Moreover, the growing momentum of Google Cloud and expanding data centres will continue to bolster the company’s presence in the cloud space.
From the negative perspective though, Alphabet is facing some downwards risks, as with Q42018 and Q12019, it invested heavily on digital advertising and on opening data centres to extend its cloud footprint worldwide and for designing, developing and marketing the new range of Pixel phones. Growth in advertising revenues will also be under the spotlight later. The revenue growth in Q1 was under 20% (the first time in over 3 years) at 16.7% and the key revenues from advertising were down 15.6%, representing a two-year lows. On top of this was the announcement earlier in the week, from the Department of Justice that the US Attorney General, William Barr, was interested in launching a broad antitrust investigation into the Big Tech companies within the USA- the sort of scrutiny that has brought successful anti-trust actions in the past in other jurisdictions, notably from the EU.
So what does Q2 hold?
In general, Alphabet is expecting revenues to be just shy of $31.00 billion at $30,90 with a consensus earnings per share coming in at $11.49 for a decline of 2% However, Alphabet has a history of beating estimates by more than 10% on average, so could Q2 prove to be the same? The Cloud business continues to grow significantly following the huge invest from Q42018, some analysts polled by Reuters are expecting the business unit to be worth between $17 and $20 billion by Q42020. However, it is a very competitive space with Amazon, IBM and Microsoft, all key players and with larger market shares than Alphabet. The investment needs to continue.
Technically, Alphabet shares are up 9% year to date, under performing peers and the wider USA500 in general. The chart is very mixed although Analysts remain biased to the upside with 38 of 43 having a BUY or STRONG BUY rating for the stock, with targets ranging from $1,150 to $1,500.
The Pivot zone is the confluence of the 200, 50 and 20-day moving averages at $1130. Below this level $1100 provides short-term support with the lower Bollinger band at $1075. Resistance sits initially at $1160, the upper Bollinger band at $1180 and $1190.
The Alphabet numbers are released at 20:00 GMT later today, and all eyes will be on the revenue numbers and the growth of Google Cloud.
Stuart Cowell, Head Market Analyst at HotForex (read our HotForex Review)
Stock prices were mixed on Wednesday whipsawing mid-day following the Federal Reserve decision on interest rates. Most sectors were lower as prices were led down by Financials which dropped more than 2.3% and cyclicals. Energy shares bucked the trend surging higher as crude oil prices rallied in the wake of the larger than expected draw in crude oil inventories.
The Fed was more dovish than expected. The Federal Reserve kept interested rates unchanged, but that was widely expected. What was also expected was that the central bank also downgraded GDP for the balance of 2019 and 2020. GDP for 2019 is expected to rise by only 2.1%. The Fed also believes that unemployment will tick higher.
What most market partcipants focused on were the dot plots. This is were the Fed sees rates going forward. In December the Fed saw rates rising 2-3 times in 2019, and today, they now see no rate changes for the balance of 2019. In 2020 the Fed currently sees one rate hike. Lastly, the Fed said that they would soon end their balance sheet runoff. In May, they will start winding down the runoff of assets and in September they will begin to keep assets stable. The dollar tumbled in the wake of the Fed dovish commentary, which weighed on US yields.
Stock prices initially whipsawed after the decision and continue to gyrate during Fed Chair Powells press conference. With the Fed on the sidelines, the market will not face headwinds which come in the form of higher rates. The 10-year treasury tumbled down to 2.52% breaking down through support levels. Those who are bearish will state that growth will now be lower than expected which should weigh on earnings.
Google Was Fine by the EU
Google was fined $1.7 billion by the European Union for limiting how some websites could display ads sold by its rivals. Wednesday’s decision is the last among formal charges the EU’s antitrust regulator has so far filed against Google. The fine deals with abusing the dominance of its search engine to block competitors in the niche market of selling text ads.
Bayer Drops on Roundup Concerns
Bayer shares dropped 12% Wednesday after the chemicals and pharmaceuticals giant faced another legal stating that Roundup weedkillers cause cancer. A San Francisco jury found that exposure to Roundup was a substantial factor in triggering a man’s non-Hodgkin lymphoma.
Energy Shares Rally Along with Crude Oil
Energy shares received a boost as oil top $60 a barrel on Wednesday. This follows a larger than expected draw in crude oil inventories. US crude oil inventories decreased by 9.6 million barrels from the previous week. This compares to expectations of a decline of 1-million barrels. Gasoline inventories decreased by 4.6 million barrels last week and distillate fuel inventories decreased by 4.1 million barrels last week.
Blockchain and Artificial Intelligence as technologies has seen a shift in observation by critics, investors, miners, users, and the cyber population, in the past two years. With words in support like a revolutionary bend in banking–Crypto Banking, automation of services–Artificial Intelligence and the capabilities of eliminating regulatory hurdles of managing/securing/creating data–Blockchain; the last 5 years has been interesting, controversial, and worth a mention in cyber history.
The power of networking fused with programming tricks is what Blockchain can be called at present and imagination empowered by technology is what Artificial Intelligence can be entitled to. But the real question is that all this necessary and smart drift in technology capable of being called as the Fourth Industrial Revolution in spite of the controversial infrastructure attached to it by the governments who are scared of a “little change”?
“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly”–Vitalik Buterin
Since Blockchain earned its reputation by an entirely successful community, Artificial Intelligence is backed by Tech Titans like Google and Facebook. “Artificial intelligence would be the ultimate version of Google”–Larry Page. Let’s go deeper into the relevance of these prevalent technologies and the actual and necessary use they are bringing in the field gawked by the governments.
AI, Blockchain, Crypto Banking ready for industry dominance in 2019
Since I have shared a small trailer like a piece for Blockchain and Artificial Intelligence above, I would like to throw some thunder on the most active, necessary and revolutionary implementation of the techs in a little detail.
The much-required Blockchain Implementation: Crypto Banking
The best edge given by Blockchain to us is Crypto Banking, apart from the undercurrents of several crypto coins. The future of payments is backed with security and security, as it is uniquely suited to improve verification of account balances, replace expensive and exaggerating middle process of validating transactions.
Blockchain backed crypto networks and Crypto Banks like Quorums–Ethereum based blockchain network by JP Morgan Chase, FotonBank–Decentralized virtual crypto banking system empowered for instant payments, and Crypto Bank are leading the mentions in the crypto world.
Since many in the finance arena isn’t quickly sold on crypto as they belong to the organized business sector, the viability of crypto backed banking is questioned and in few cases dismissed. Despite the record investor profits gained from the GOD coin, Bitcoin saw 1,300 percent rise last year i.e. 2017, most banks have chosen to stay away. However, Goldman Sachs is reportedly betraying the herd mentality developed for Blockchain and plans to establish the first bitcoin trading operation at a Wall Street bank according to CNBC.
More, JPMorgan’s Former Blockchain Head, Amber Baldet, comments about the entry of JP Morgan into Blockchain as: “It’s an open-sourced project, it’s completely agnostic and industry agnostic as well.”
The Banking Revolution
Initiated by Andrey Pashkevich, CEO and Co-founder of FotonBank, explains: “With the ambition of providing immediate transactions, we focussed on forging a decentralized wallet that would have a capability of maintaining anonymity, ability to get instant payments, along with an ease of cryptocurrency-to-fiat transactions, smart integration with external wallets PayPal, Visa, WeChat, etc, and compliments of cashback programs; all done to implement the best of blockchain.” In short, the mainstream finance arena can be easily displaced with the relevance of blockchain and its security promise.
AI and its “Quantum” debate
The intention of Artificial Intelligence is to change the existing social and work boundaries with the assistance of man-made observer and follower of trained commandments, i.e. a robot or superficial algorithm. Artificial Intelligence, since the years, has gained polarized opinions coming from technical, legal, government and academic practitioners. But the technology has indeed proved every headline it has in its name, with many well-thought of and implemented examples like:
Quantum Computing: Quantum computers or supercomputers in simple terms are known for their own inherent risks. Quantum Computing is different from traditional computers as they are based on mechanical phenomena like entanglement and superposition, unlike regular computing systems which are based entirely on binary systems. Nigel Smart who is the founder of Dyadic Security comments on Quantum Computing:
“…all of the world’s digital security is essentially broken. The internet will not be secure, as we rely on algorithms which are broken by quantum computers to secure our connections to websites, download emails and everything else. Even updates to phones and downloading applications from App stores will be broken and unreliable. Banking transactions via chip-and-PIN could [also] be rendered insecure (depending on exactly how the system is implemented in each country).”
To close the argument on Quantum Computing, I will feature the most debated definition of the invention, which clearly explains it’s feared capability–“The genius of Artificial Intelligence basically explains the behavior and nature of matter and energy on the atomic and subatomic level.”
Steering towards to the GOD coin, that started all the hype, Bitcoin deceased in its popularity and price, both, this year, and might continue to fall, but this will finally give Blockchain the chance it deserves as it will come out of the undercurrent of several cryptocurrencies.
In Spite of several opinions, predictions, and thoughts on Blockchain, the tech will continue to breed in inventions. Evidently, Fintech and Blockchain Tsunami is triggered by Crypto Networks, Exchanges, ICOs, and Wallets, like Coinbase and Xapo, all existing with millions of dollars bid under their name by smart investors. More, companies like FotonBank are bidding in contributing towards the Fourth Industrial Revolution through its legitimate implementation of Blockchain. All of this is done on the promise of “created trust” that Blockchain provides.
The Verdict: AI and Blockchain
It is no news that AI and Blockchain have experienced a little overlap in the past few years all due to the emergence of Big Data, that has proved to be a catalyst in between Blockchain and AI relationship. The organization of data for businesses through Big Data, created especially for AI and the advancement of Blockchain triggered through the distributed ledger, further promoting secure and automated storage; the novel combination is a part of the reason for the flagging of Fourth Industrial Revolution.
After the initial breakthrough on the truce in the trade wars, the U.S. and Chinese indices had lost momentum, and today are performing a moderate decline. On Tuesday morning, Futures on S&P500 are around 2775, cutting 1.8% gains from Friday down to 0.4%. Shanghai’s China A50 is 1% below peak levels at the start of the Monday’s session.
The Initial optimism is slowly dissipating, and markets are waiting for the further signals. Today no important data publications are expected, so, players’ attention will switch to technical analysis.
It is interesting that the rebound in stocks on American exchanges was led by fast-growing IT-companies (FAANG), which underwent the most serious corrections in October and November. That may be a signal for a full return of risk appetite from the market participants.
Despite the impressive increase in heavyweights, such as Apple (+3.5%) and Amazon (4.9%), S&P500 yesterday failed to develop its rebound above the previous local highs. The growth of the index above the 2815 level has fast reversed to decline, which could be a harbinger of a new index drawdown to the October-November lows. The Sell signal, according to the technical analysis, can additionally strengthen the S&P500 below 2660 by the end of the day. In this case, we will see the return under the key levels of 200- and 50-day averages, and the so-called “Death Cross”, when MA (50) crosses the MA (200) line from top to bottom.
An equally interesting situation in the GBPUSD pair. In the previous three months, its rebounds were lower: 1.33, 1.3250, 1.3170. Then it has returned to support at 1.27, from where the pair rebounded in August and November. Also, this level was an important watershed in 2017, which increases its importance. Falling under this mark can start the movement up to 1.20: local lows after Brexit. Keeping the above can be seen as a signal that investors believe in smoothly Brexit. The pair’s behavior near the key level can be influenced by the Bank of England Governor Mark Carney’s speech at the Special Treasury Committee about the UK independence.
Asian markets closed down across the board on Tuesday as mounting global woe rocked the market. The Chinese ShangHai and Hong Kong Heng Seng led with losses greater than -2.0% while others in the region fared better. The Japanese Nikkei was down a more modest -1.10% despite growing weakness in the automotive sector while in Korea and Australia losses were well below -01.0%.
The Nissan board has issued a statement saying that Carlos Ghosn and another board member had been under-reporting their compensation “over many years”. The misrepresentation is material to their disclosure requirements and a violation of Japanese financial regulations, a breach that resulted in Ghosn’s arrest on Tuesday. With his arrest comes the natural question, because he’s the CEO of multiple car companies several countries have done the same thing elsewhere?
Europe Down As Tech-Wreck, Banks Lead Losses
The European market was broadly lower at mid-day on Tuesday on weakness in tech and banks. The banks were down on a combination of factors that include Brexit uncertainty, the Italian budget stand-off, slowing domestic growth, slowing global growth, and trade concerns. The sector sank despite positive results from UK lemder Cybg. The UK lender says pretax profits rose 13% in the last year, it also says management has “planned for a period of uncertainty” and sent shares down more than -10%.
Shares of Renault fell another -2.5% in early trading as the Carlos Ghosn scandal ripples through the market. Ghosn, also CEO of Renault, is likely to be ousted from his position at Renault as a result of his arrest. He may also have under-reported his compensation in France.
Tech-Wreck De-FAANG’s US Market
Tech led the global decline and was felt nowhere more strongly than among the FAANG stocks. Facebook, Amazon, Apple, Netflix, and Google all shed at least -2.0% on Monday, most shedding more than -4.0%, as fear of slowing growth hit the sector.
A report that Apple had cut orders for one of its iPhone X models sent a shockwave through the market that affected the entire supply chain and all technology related to mobile. Shares of FAANG continued their slide on Tuesday adding at least -1.0% to individual losses and plunging the group deeper into bear-market territory.
Downward pressure in retail also had the market moving lower on Tuesday morning. Misses from Target and Kohl’s had shares of those stocks down more than -10% despite positive reports from both companies.
The tech-heavy NASDAQ Composite led the major indices lower in pre-market futures trading. The index was looking at a loss of -1.58% followed by -1.10% declines for the both the S&P 500 and Dow Jones Industrial Average. Trading volume is going to be light on Tuesday, Wednesday, and Friday because of the Thursday holiday. Traders should beware of volatility, exaggerated market movements, and whipsaws.
The technology sector has been driving the US stock market higher for a long period of time. Now it seems like the tide has turned and the sector could start doing the opposite.
Like all other major indices in the US, the Nasdaq 100 index, which is represented by the QQQ ETF, dropped below the key 200-day moving average in late October. The following short-covering rally brought the index back to this level, but bulls failed to push the QQQ index back above and the price declined instead. Moreover, the fundamental nature of this aggressive sector seems to be changing from the buy the dip mantra to sell the rally psychology.
Moreover, all the big names, known as the FAANG stocks (Facebook, Amazon, Apple, Netflix, Google) have been dropping sharply over the last couple of days, with Apple being the only stock still above the 200-day moving average. Since all the big names are falling, this decline appears to be structural and therefore it could continue over the next few weeks.
Investors are starting to wonder if the big companies can hold their margins and earnings if the US economy slows amid higher interest rates. Compared with other indices, the technology sector has seen the largest rise since 2008. This suggests that it could be hit the worst should a notable correction start on the equity markets.
Last Friday’s US labor market data showed that wage growth has reached 3.1percentt year-on-year, which is the fastest pace since April 2009. This was a strong inflation signal and supported the Fed’s view to hike rates faster, rather than slower.
On the plus side, there is a bullish divergence on the daily chart between the RSI indicator and the price of the QQQ index, which could – at least from the short-term point of view – offer some support.
The main resistance remains at the 200DMA near 172.50 USD and if the index jumps beyond, bulls could be in charge again, with the next target probably at the 100DMA near 178.40 USD.
On the downside, the support could be at 165.00 and then it could move to current cycle lows at 160.00 USD. If bears push the price below this level, the downward trend would be confirmed, targeting the 150.00 USD mark.
This article was written by Peter Bukov, one of TeleTrade’s leading analysts.
American indices were again under pressure at the end of the day, rewriting the minimums from May on the S&P500 index. According to the results of the day, the losses amounted to 0.7%, although the amplitude of fluctuations remains elevated, reaching 3.8% in just a few hours.
Spreading fixation of profit has put the quartet FANG (Facebook, Amazon, Netflix, Alphabet) in jeopardy, and took away from their total capitalization about $600 billion from the peak values. The main driver of the weakening on Friday and Monday were the Amazon shares, that lost over 14% after a weak earnings report.
At the same time, key indices are supported during recessions, and outside of the current weakening, the trend in the stock markets shifts. The growth shares, an excellent example of which is FANG, risk giving up leadership to income stocks with good earnings and dividends.
Income-oriented equities are the focus of the market as the economic cycle ages. The next phase may be the demand for countercyclical papers, which are presented by the companies of the military-industrial complex, manufacturers of medicines and foodstuffs. But it is not so easy to predict the exact time of this switch.
It should be noted that the purchase of indices on recessions in combination with strong macroeconomic data from the USA does not allow to speak about a large-scale sale, but only about the change of priorities among the investors.
The dynamics of Asian playgrounds implicitly confirms our idea in the morning on Tuesday. Index Nikkei has added 2.2% this morning. The futures on S&P500 have grown by 0.6% this morning, and the Japanese yen (a great barometer of the demand for risks) has lost 0.8%, pointing to the persistence of global investors’ thrust for the purchases of securities.
The dollar index is slowly gaining strength, settling in 96.50 – one step from the highs since the middle of 2017. The main reason behind this move was weakening of the euro amid fears around the political situation in Germany, where Merkel promised to resign from the post of the head of the CDU party and leave the post of Chancellor after 2021.
Asian indices fell hard in Thursday trading following a massive rout in the US. The Japanese Nikkei led with a loss of 3.72% and outpaced most other major indices in the region. The Nikkei created a large price gap at the open and fell from there, creating a large red candle and setting a new 9-month low. The is bearish and gaining momentum although price action is now approaching a key support level near 21,000.
The Australian ASX posted the second largest decline during the Asian session with a loss near 2.80%. The ASX was led by tech, but bloodshed was not limited to one sector. The energy, financial, and mining sectors all saw substantial losses with shares of Rio Tinto and BHP falling roughly 3.0%. Chinese indices were not immune to the selloff but fared much better than either the Nikkei or ASX. The Hong Kong Heng Seng led Chinese markets with a loss of -1.0%, the mainland Shang Hai index posted a gain of 0.02%.
The ECB Holds Rates Unchanged
In Europe attention was focused on earnings and the ECB. The ECB held their October policy meeting over the past two days and released their statement this morning. The bank decided to hold rates unchanged which was expected; the bank also maintained its outlook for tightening. The ECB says they are on track, barring unexpected data, to end their bond purchase program in December and to begin policy tightening mid to late 2019.
EU markets were mostly flat and mixed at midday. The UK FTSE was the only index to hug the flatline, trading in a tight range over and under 0.00%, while the DAX and CAC were both able to post gains. The CAC led advancing markets with a gain near 1.0% followed by a distant 0.35% for the DAX. Markets in the region were buoyed by earnings more than anything else. Automakers were strong performers as their results reveal dominance over US car makers like Ford (F) who reported sales decline for the region.
US Futures Point To Rebound, Earnings In Focus
In the US futures trading indicated a strong open. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite were all indicated to post a gain of near 1% led by tech. The NASDAQ was indicated to open with a gain near 1.5% as strong earnings from Microsoft (MSFT), VISA (V), and Tesla (TSLA) all blew past expectations for revenue and earnings growth.
Regarding earnings and earnings season; today is the single busiest day of the season with 66 S&P 500 companies reporting. Reports from Amazon, Google, Intel, Pricesmart, Mattel, and Chipotle Mexican Grill are all due after the bell. Based on reports so far there is a high likelihood this batch will produce better than expected results with a few outlying misses. What will matter to traders is the impact of tariffs and trade war on earnings and how they will affect the outlook for earnings growth over the next five quarters.
The developing trade war between the US and China has created turmoil in emerging markets, most noticeably in the form of a sell-off of the Chinese stock market and currency.
Trading the trade war is not very straightforward. Firstly, we really don’t know how it will end. It will probably be resolved eventually, but the timing will make a big difference.
The longer it lasts the more damage will be done, and that will have longer-term implications. A longer trade war may also trigger a domino effect through other parts of the global economy. If the trade war was to be resolved fairly soon, prices would normalize quite quickly.
One thing to remember is that it appears Trump is happy to keep the pressure on as long as the US stock indices continue making new highs. If volatility in the US stock market picks up, as it is now, he may be forced to soften his stance.
Several markets related to the trade war are currently very oversold, and should the impasse be resolved, sharp reversals are possible in some of these markets.
Traders should be careful of using the same approach across all emerging markets. Some markets have been caught up in the trade war, while others have deep-seated underlying problems of their own.
Tensions over trade began to grow between the US and China between January and May this year. In May the US began to effectively impose tariffs on certain imports from China by terminating tariff exemptions. More products were added in June and more gain in September.
The Chinese Renminbi has fallen 10% since March as the trade war has escalated. The Shanghai composite has meanwhile lost as much as 25% since the beginning of 2018.
The slide in the renminbi has to a certain extent offset the added tariffs – the weaker currency means US importers are paying slightly less before tariffs are added.
It’s worth noting that the slide in the value of the Renminbi has slowed significantly since July despite the additional tariffs with a double top potentially forming. It is possible that the Chinese Central Bank is supporting the currency to prevent capital flight, as they experienced in 2015/2016.
Not many forex brokers offer to trade in the Renminbi, but a few do. If you are looking to trade the Chinese currency you will be trading the Offshore Renminbi or CNH. The CNY is the Onshore Renminbi which us restricted and managed by the Central Bank.
Turkey has several problems. Firstly, a series of populist policy decisions by the president eroded investor confidence, triggering a selloff of the already structurally weak Lira. This turned into a vicious cycle as much of the country’s government and corporate debt is USD denominated, and effectively rises as the Lira weakens. On top of this precarious situation, the US then imposed new import tariffs on Turkish goods.
The Turkish Lira had lost almost 46% of its value by the middle of August and is now consolidating in what could turn out to be either a continuation or reversal pattern. The benchmark equity index, the BIST100, fell as much as 30%, though it has recovered some of those losses.
The Turkish economy is one of the most vulnerable in the world, and further emerging market volatility could very easily lead to further losses for both the currency and stock market. Investors will probably want to see policy changes before a sustained recovery begins.
Argentina had to turn to the IMF to help prop up its balance sheet in May, and this loan was recently increased to $57 billion. The Peso reached an all-time high of 41.47 against the USD, having traded at 18 in January. Last week, the Central Bank raised interest rates to 65%, indicating how serious the crisis is.
The benchmark stock index recently tested the all-time high recorded in January – though this has more to do with the inflationary effect of a weak currency than with earnings.
Argentina is one of the weakest markets and will be vulnerable to further fallout from the trade war. Traders watching the stock index should focus on the technical picture rather than trying to weigh up valuations and a fluctuating currency.
South Africa’s economy has been under pressure for several years as a result of a scandal-ridden government. In the second quarter, the country officially dipped into a recession.
South Africa’s currency, the Rand, is structurally weak and was also rated by Bloomberg as one of the most vulnerable in the world. The Top40 stock index has made little ground since 2014 as political uncertainty led to an investor exodus.
A certain degree of political stability has been restored and South Africa is beginning to look more like a potential turn around play. South Africa is also a major commodity exporter and highly correlated with China’s economy. If the trade relationship between China and the US is resolved, SA may be a market to watch on the upside.
Commodities, especially base metals like copper and iron ore are another potential play based on how things develop. If the standoff is prolonged its likely to have an ongoing impact on China’s domestic economy, which includes massive infrastructure projects. Besides metals prices, traders can also look to Australia’s large commodity exporters.
Global Tech Stocks
The original FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google) have a few problems of their own. Not only are they priced for strong growth going forward, but the likes of Facebook and Google are facing growing scrutiny over issues related to users’ personal data.
The trade war has now brought a new dynamic to the sector. Chinese tech giants Alibaba and TenCent are both under pressure due to the trade war. China is also very important in Apple’s life, both as a supplier and as a customer. Ongoing pressure on China’s economy will eventually begin to impact Apple.
As you can see there are quite a few instruments that traders can use to play the trade war, either in the case of an escalation, or continuation or in the case that it is resolved. When choosing a forex broker it’s a good idea to look at the range of instruments offered so that you have the option of expressing trades through several instruments.
As was mentioned at the beginning, it’s impossible to predict how all of this will play out. Traders should, therefore, trade opportunistically and keep an open mind.
It has been a rough couple of days for equity investors as stock markets plummeted sharply in the recent days. As for the main catalyst for this rout, we can safely assume it was the rocketing US yields, along with the fears of a global economic slowdown.
According to the International Monetary Fund, global growth estimate has been lowered to 3.7% in 2018 and 2019, down from the 3.9% anticipated by the IMF in July. The group downgraded the outlook for almost all the major economies, citing the ongoing USA-China trade war as the main reason.
Moreover, luxury stocks were among the worst losers as the luxury company LVMH, owner of Louis Vuitton, Christian Dior and Dom Perignon warned of slowing demand for luxury goods in China. The price of LVMH crashed nearly 10% in Paris on Wednesday and dragged lower other stocks in this sector.
The same thing happened in the US on Wednesday as the company Trinseo became the second chemical manufacturer this earning season to downgrade the earnings outlook, when it warned of disappointing results because of pricier raw materials and slow sales in China. The stock dropped most on record and lost 18% after dropping 6% on Tuesday.
Additionally, the newly created communications sector, which contains some of the well-known FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) hasn’t been met with much of an interest and FAANGs are dropping like a stone. On Wednesday, these stocks experienced the biggest decline since July and are down to their lowest since May. FAANGs are down 10% in the last 9 days.
To conclude, equity indices have been poised for a correction for some time. It would appear that sharply rising US yield curve, still hawkish Fed and higher oil prices are causing some repricing of future economic growth, which has become a very negative thing for stocks worldwide.
However, to sound a bit more optimistic, all the major US indices remain above their respective 200-day moving averages, meaning the long-term bullish trend is still intact for US benchmarks. These averages could be soon tested and that will be the crucial moment for equity investors as breaking below could cause a larger correction worldwide.
The upcoming week will be a significant one to the markets. The FOMC meeting minutes on Wednesday can shed light on the Fed’s rate hike projection and China’s Growth Domestic Product on Thursday can be a game changer.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don’t represent a recommendation or an investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.
This article was written by Peter Bukov, one of TeleTrade’s leading analysts.
The FANG stocks are some of the biggest consumer and tech stocks listed on the US market. They are favorites amongst active traders because their high growth rates have led to massive returns and strong trends.
CNBC host Jim Cramer originally coined the term ‘FANG Stocks’ in 2013, and it referred to Facebook, Amazon, Netflix, and Google. Most traders now include Apple and use the acronym FAANG.
Some have even included Alibaba and Nvidia, extending the acronym to FAAANNG. However, for this discussion, we will stick to the five, FAANG stocks: Facebook, Apple, Amazon, Netflix, and Google.
The easiest way to profit whenever a FAANG price goes up or down is to trade Contract for Difference (CFD) on these stocks.
An overview of the FAANG Stocks
Facebook is worth $450 billion, making it the fourth largest company in the world by market cap. Since listing in 2012, the company has grown EPS from $0.16 to $6.80 in 2017. It’s done this by building a user base of over 2 billion monthly users and growing the profitability of its advertising business. Facebook’s stock price has risen more than 500 percent since 2012.
Amazon is the most successful web retailer in the world and the second most valuable company in the world. Since 2010, it has grown annual earnings from $2.28 a share to $6.35, which is the reason the company is now worth $863 billion. Traders and investors both love Amazon and believe in the vision of its founder Jeff Bezos. $1,000 invested in Amazon in 1997 would be worth over $1 million today.
We all know how innovative Apple, the company that brought us the iPod, the iPhone and the iPad, is. Steve Job’s vision and the company’s long history of bringing out new products has made it the most valuable and profitable company in the world. Between 2005 and 2015, Apple grew net income from $1.13 billion to $53 billion, a 5000% increase. Its earnings per share have grown from $1.68 in 2010 to $10.36 in 2017.
Netflix is one of the fastest growing companies in history. If you had invested $1,000 in Netflix in 2002 when it listed, your investment would be worth over $400,000. However, along the way, Netflix has had some large pullbacks, allowing traders to short the stock, and then buy it back at a lower price.
Anyone who uses the internet knows how prolific Google is. It’s all over the web and makes over a hundred billion USD a year from its advertising business. Although it is no maturing as a company it still managed to grow earnings per share from $10 in 2010 to $34.2 in 2017. Google’s share price has doubled since 2015, giving the company a value of $800 billion.
Using CFDs to Trade FAANG Stocks
FAANG stocks are favorites amongst traders because they have strong underlying growth, lots of liquidity and they are in the news a lot. There are opportunities to trade over every time period from minutes to months, and opportunities to go long and short.
CFDs (contracts for difference) are one of the best instruments to use to trade these types of stocks. They offer the opportunity to use leverage and to take short positions not only on currencies and commodities such as EUR/USD, GBP/USD, gold and crude oil but also on stocks. When you trade CFDs you do not actually own the underlying asset, but you have exposure to the price move, whether its up or down.
Recommended trading strategies
There are several very different trading strategies that investors can use to trade FAANG stocks. Because these stocks are in the news a lot, traders often trade around announcements and other news flow.
Stocks offer the best trading opportunities when volatility increases, and this happens when more traders are watching them. For Apple, this happens when a new product is launched and when earnings are announced. For Amazon, Prime Day and the Christmas shopping season are important. For Facebook and Netflix, any announcement about subscriber and user numbers are important.
Traders need to work out what the market is expecting and whether the company is living up to those expectations. Traders will often buy a stock as the hype increases, and then sell when the news is released – unless it’s much better than expected. If they believe the amount of hype is unrealistic, they may even go short just before the announcement, in anticipation of disappointing news.
If you trade on short-term charts, you can take long and short positions, in the direction of the medium-term trend on a 4-hour, 60-minute or 15-minute chart. Moving average cross-over strategies work well for FAANG stocks on these charts, especially when the hype rate is increasing.
The FAANG stocks are favorites amongst active traders because they are well-known companies that people understand, and because a lot of people follow them, there is lots of volatility and liquidity. The fact that they also have high growth rates means they also have big price moves. These factors all contribute to their popularity amongst traders.
The beginning of October brings with it the biggest changes to the SP500 index since 1999. Some sectors and industries will most likely emerge, and some may disappear, with their respective weight in the index changing as well. Additionally, some stocks may move to other sectors. These changes may mostly affect the IT, telecommunications and consumer goods sectors.
Consequently, the weight of the information technology sector may fall from the current 25 percent to 20 percent. A new sector is likely to be created, specifically the communication services sector, which may have a weight of 10 percent in the SP500 index. This new sector will be created by moving all titles from the telecommunications industry, which previously had a weight of 2 percent in the SP500 index. After this, the telecommunication sector will probably cease to exist. In addition, several IT and consumer goods companies will most likely be transferred to this new communications services sector.
Among the stock titles that should complete the emerging communications services industry by moving from the IT sector are Alphabet (Google), the dominant social networking player Facebook, as well as EA, Activision and Take-Two Interactive games. Verizon and AT&T will most likely move from the telecommunications sector. From the consumer discretionary sector, Netflix, Disney, 21st Century Fox, and a number of more companies may join the new communications sector in the near future.
What might be the impacts of changes on investors? There are many of them, and in the long run, many of them are crucial. They relate, for example, to the nature of the sectors, including impacts on growth outlooks, dividend yield, exposure to the cloud or AI trends, automatic or forced the rebalancing of portfolios of hundreds of ETF funds and other aspects.
These changes may have a major impact on the IT sector, which has grown to a quarter of its weight in the SP500 index and, has begun to dominate the index. The two major companies which might be affected by this are Facebook and Alphabet, the two main growth drivers with a very high market capitalization. The ‘new’ technology sector may, therefore, have lower expected future revenue growth, earnings per share and a lower margin than the current or future new communications services sector. The largest companies in the technology sector after this change will probably be Apple (19 percent) and Microsoft (16 percent), followed by Intel (5 percent). These are companies with lower valuations, measured for example by the P/E or P/S multiples, and which also have a lower regulatory risk. On the other hand, these companies have a significantly lower growth outlook and weaker exposure to growing cloud services and artificial intelligence. The nature of the IT sector is changing significantly, so investors focusing on growth titles may be able to assess current changes by rebalancing out their portfolios.
On the contrary, new money can be moved to the newly emerging communications sector. This will probably provide an appealing vision of future growth, as Alphabet, Facebook and Netflix will most likely move here. However, this growth dynamics should be moderated by the AT&T and Verizon telecoms companies, which are growing in the same way as the whole economy (for example, they are defensive stocks). In return, they may provide higher revenue stability and higher dividend yields.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don’t represent a recommendation or an investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.
This article was written by Peter Bukov, one of TeleTrade’s leading analysts.
The “smart” revolution is all around us, as a growing number of common items are becoming highly technological. It happened with the telephone, it happened with TV, it happened in numerous fields of industry – and now it’s happening in the automotive industry. Self-driving cars are very much a reality, and we will be seeing them in rising numbers on the road within the next few years. This evolution of the personal car, which over the years incorporated more and more technology into it, has resulted in a vehicle that no longer needs a human driver – and the financial potential is incredible.
The driverless car will be one of the most tech-heavy products available to consumers, and as such, will combine numerous components from both automakers and high-tech companies. To learn more about the different aspects of the autonomous car industry, projected to become a $7 trillion market(1) eventually, read this blog post.
Being such an innovative field on the one hand, yet being developed by some of the world’s largest, and most recognizable, companies on the other, the driverless car industry presents an interesting thematic investment opportunity. However, since it involves companies from different industries, operating in various markets around the world, building a thematic investment portfolio to track the industry can be challenging. That is why, here at eToro, we are launching the Driverless investment strategy, through which the members of the eToro community can invest in this sector.
The Driverless CopyPortfolio: Composition
This managed portfolio strategy contains an array of global companies, ranging from automakers, through hardware manufacturers, to software companies developing computer vision, navigation systems and other solutions relevant to the sector. The companies span several industries and have an overall impressive global presence – and are all part of the trend that will make driverless cars a common part of our daily lives in the coming years:
Tesla (TSLA) – Elon Musk’s electric car company has established itself as one of the most intriguing players in both the tech and automotive industries in the US. The company is developing driverless cars and trucks and is one of the pioneers in automotive innovation.
Fiat Chrysler (FCA.MI) – One of the largest automotive corporation in the world, Fiat Chrysler has a strong presence in both the North American and European automobile markets, and is working on its own self-driving car.
Toyota (TM) – The world’s largest automakers, Japanese Toyota is known to be a highly reliable carmaker, have a strong international presence, and pioneering innovative technologies, such as one of the world’s first mass-produced hybrid personal cars.
Honda (HMC) – Another Japanese carmaker, Honda’s name has also become synonymous with quality, for both family cars and high-end sports cars and luxury sedans. Honda is also working on a driverless car, declaring 2025 as the target year for a nearly fully-autonomous vehicle.
Ford (F) – The world’s first automotive company is still one of the most influential carmakers out there. The company has announced plans for robot cars for ride-hailing and delivery purposes and will be testing them in Miami in the near future.
Renault (RNO.PA) – The French car giant has taken great strides in the autonomous car department: Its Symbioz concept model has generated positive reviews, both for its extremely advanced artificial-intelligence-assisted driving and its innovative approach of including the smart car as an integral part of the smart home of the future, positioning it as a notable player in the industry.
BMW (BMW.DE) – The German luxury car maker is a prominent player in driver-assistance technology, such as self-parking systems, which exist in some of its high-end brands. Therefore, it is no wonder that the company has been very public about its plans for creating a completely autonomous vehicle in the future.
Volkswagen (VOW3.DE) – Pledging to add electric motors to all of its models by 2030(2), this German giant is also researching completely autonomous cars. The VW I.D. Vizzion concept model unveiled by the company is a fully self-driving car, that doesn’t even have a steering wheel or pedals – it is designed to do all of the driving for the passenger.
General Motors (GM) – The largest car manufacturer in the US, GM is no stranger to innovation. In the early 1990s, GM completed the development of the world’s first serial electric car, the EV1. Despite later being pulled from production, GM has proved that it is ready for big changes in serial manufacturing – a quality that will serve it well when the market tilts towards the driverless.
Tata Motors (TTM) – India’s largest car manufacturer, which is part of a $151 billion conglomerate, is actively testing autonomous micro-cars. According to Tata, it might be one of the first companies to roll out mass-produced self-driving cars.
Caterpillar (CAT) – One of the largest heavy industry vehicle manufacturers in the world, Caterpillar is developing driverless trucks that could revolutionize many industries. In fact, the company is no stranger to automation, as several of its products already include self-driving trucks and other heavy vehicles, used by mining and construction companies around the world.
Delphi (DLPH) – This auto parts company is one of the world leaders when it comes to electrical systems and software for vehicles. Its products could play an instrumental part in the linking of cars to advanced computer system required for autonomous driving.
Ferrari (RACE) – The Italian supercar’s name is synonymous with luxury and speed. While it has distanced itself from the autonomous car space, it did declare that it is working on a fully electric supercar, which will rival the likes of Tesla.
Volvo (VOLV-A.ST) – Swedish carmaker Volvo already has high-tech driver-assistance solutions in some of its models, which is a significant step in the direction of a fully autonomous vehicle.
Alphabet (GOOG) – Google’s parent company is also the owner of Waymo, a company who already has self-driving cars roaming the streets of Silicon Valley. Unlike some other tech companies, who’ve kept their progress under wraps, Waymo has been very public with its driverless car prototypes and their performance.
Alibaba (BABA) – The Chinese retail giant is known for its massive interest in technological innovation. Therefore, it is no wonder that the company has confirmed that it is also in the race for developing a self-driving car, alongside other tech companies.
Baidu (BIDU) – Perhaps one of the strongest competitors in the race of launching the first road-ready autonomous car, Baidu has enjoyed the support of the Chinese government and is manufacturing and testing autonomous cars and buses. According to the company’s Apollo project timeline, Baidu will have a fully autonomous car ready for mass production by 2021.
Microsoft (MSFT) – One of the largest tech corporations in the world, Microsoft is also heavily involved in implementing its technology in driverless cars. Some of the cars that use Microsoft’s technology are already being tested in several locations around the world.
Blackberry (BBRY) – The former smartphone giant has pivoted into other areas in recent years, including software development. Blackberry is developing software that will be used in the autonomous car industry and has a partnership in place with Chinese giant Baidu.
Intel (INTC) – According to the company, Intel has a chip in virtually every self-driving car that is being tested today. Moreover, the company strengthened its grip on the market by acquiring Mobileye, a startup which develops computer vision driver-assisting technology, for a whopping $15 billion.
Apple (AAPL) – The world’s largest company has a strong presence in numerous fields of technology – and autonomous driving is no exception. Apple has been quite secretive about its driverless plans, but reports suggest the company is developing a brand new self-driving car of its own.
Nvidia (NVDA) – Since an autonomous car requires great computing power, it is in need of strong processors. Nvidia is one of the world’s leading manufacturers of processors for some of the most performance-based computer functions, such as the real-time rendering of graphics-heavy computer games. Therefore, it is only natural that the company will also be taking part in making processors for self-driving cars.
STMicroElectronics (STM.MI) – Europe’s largest semiconductor manufacturer, ST is also one of the companies taking part in creating the computerised “brains” that will steer the cars of the future.
Infineon (IFX.DE) – This German chipmaker is developing semiconductors used in both driver-assistance systems and driverless cars. Teaming up with leading car makers, such as German luxury brand Audi, Infineon could serve a major role in the future of the automotive industry.
Texas Instruments (TXN) – Developing semiconductors and various sensors for more than 80 years, Texas Instruments is making its way into the autonomous driving realm. In 2017, the company unveiled a new array of sensors that can be used for autonomous cars, drones and more(3).
Advanced Micro Devices Inc (AMD) – A power player in the microchip industry, AMD is known for offering computing solutions that are more affordable than its main competitors, without compromising on performance. The company started hiring personnel for its AMD automotive department, which strongly suggests it is venturing into the field.
Dialog Semiconductor (DLG.DE) – This German semiconductor manufacturer has reportedly been involved in the early stages of Apple’s self-driving cars. While currently it seems that Apple chose to go another way, Dialog does have the capability to become a leading developer of hardware for autonomous vehicles.
MaxLinear (MXL) – Developing hardware such as semiconductors and radio transmitters, this American company is directing some of its efforts into developing components to serve the self-driving car industry.
NXP Semiconductors (NXPI) – This Dutch semiconductor manufacturer already has a strong foothold in the autonomous car industry, as it is one of the companies chosen by Chinese Baidu to help construct its driverless cars.
Skyworks (SWKS) – Based in the US, Skyworks Solutions has manufactured some wireless transmitters that are being used for autonomous features in current cars. The company’s experience in the field could serve as a strong foundation for its future business in the driverless car space.
HELLA (HLE.DE) – A well-known supplier of parts and subsystems for the automotive industry, HELLA has announced that it is strategically entering the driverless space in 2018(4).
EnerSys (ENS) – This battery producer has its products powering numerous cars and aerospace vehicles. As the automobile market shifts towards being driverless and electric, EnerSys could be a dominant player, producing the batteries powering these vehicles.
Visteon (VC) – This car electronics and computing company spun off from Ford in the year 2000. Visteon has developed a unique platform for driverless cars, which enables the car’s computer to decipher its surroundings and drive itself.
Each stock within the investment strategy’s composition is given equal allocation, and it is rebalanced by the eToro Investment Committee periodically. The minimum investment using the Driverless investment strategy is $5,000.
Imagine a perfect world where the advertisement of your brand is shown only to target audience any time they use their phones. The targeting is based on location, gender, education and other characteristics which give advertisers and brands only real views for real possible clients. The advertising market launches more and more application that is developed in accordance with brands’ requirements and provide a possibility to set detailed configurations and make the promotion process simpler. One of the companies has recently launched a mobile application which is claimed to become the next revolution in the advertising market and we are about to tell you why it worths your attention.
According to Statista, there will be 2,5 billion people using smartphones by 2019. Mobile users unlock their phones from 80 to 110 times per day. At the same time, 69% of consumers from 18 to 39 years old use mobile phones for a research of products before purchasing them. Mobile devices automatically become a new channel for brands promotion as people simply cannot imagine their lives without their phones. Applications for smartphones will definitely change the advertising market.
What is the new technology?
Emarketer research states that $101 billion was spent on mobile ads globally last year which is 5 times more than in 2012. Spendings in this sector will only increase.
EasyVisual is an advertising network that before the launch of the app has already had a 3,5 million audience in 190 countries including South Korea, China, Vietnam, Poland, Slovakia, Germany, Ukraine, Turkey, Czech Republic, Israel. The company has made a right choice and decided to use as much potential of smartphones as possible in order to make brands promotion successful and cost-effective.
Banners App and its benefits
Advertising of cryptocurrencies hasn’t become simpler with the development of the blockchain technology and its fast increasing popularity. Facebook was the first social network to forbid crypto ads at the time of the Bitcoin, Ethereum and Ripple bubble. Web giants like Google, Bing, and Twitter have followed by as well. It’s getting more complicated to promote crypto projects and coins, so the advertising market comes up with new ideas and approaches in order to give cryptocurrencies a chance to get audience awareness on the same level as other products and services.
One of the ways to solve the existing problem for crypto advertisement is to launch a mobile application. For example, Banners App is based on Android operating system and doesn’t have any ad restrictions for crypto. The app can be downloaded from Google Play and is activated any time a user unlocks a phone. Users indicated their personal information in the app: location, gender, marital status, education, languages, interests, professional achievements, and wellness. The targeting is based on the following characteristics. Besides, users can set the number of times they want to see the ad.
By using Banners App brands and advertisers get:
A mobile application based on the leading and more profitable operating system in the market;
Statistical data on advertising campaign: number of real views and a conversion rate of the advertisement;
Payment for real views of the ad that is shown only to the target audience.
Thanks to EasyVisual there will be no more useless advertisement and money spent on the promotion will prove its worth.
The major U.S. equity markets lost ground last week with the broad-based S&P 500 Index dropping more than 1% for the first time in two months. The Dow Jones Industrial Average outperformed the other major indexes, but still lost 0.2% last week. The biggest loser was the technology-heavy NASDAQ Index, which logged its worst week in nearly six months.
For the week, the benchmark S&P 500 Index closed at 2871.68, down 1.0%. It’s up 7.4% for the year. The blue chip Dow Jones Industrial Average finished at 25916.54, down 0.2%. In 2018, it’s up 4.8%. The tech-driven NASDAQ Composite settled at 7904.20, down 2.6%. However, it is still up double-digits for the year at 14.5%.
Although the government reported robust jobs data with the economy adding more than 200,000 jobs and wages rising 0.4% in August or 2.9% annually, the good news failed to generate enough upside momentum to overcome the downward pressure created by escalating trade concerns.
The failure by investors to drive stocks higher on Friday strongly suggests that uncertain trade negotiations are the headline risk at this time. The employment data shows that wages are rising at the fastest clip in nearly a decade. This should put more money in consumers’ pockets, which should help the economy grow at a faster clip.
However, it also means that with unemployment reaching nearly a 50-year low at 3.9%, fewer available workers are available to add. Furthermore, rising wages, combined with the 18-year high in consumer confidence, suggests inflation will continue to firm.
This should prompt the Fed to continue to tighten at perhaps a faster pace. Since lower rates provided the energy to drive stocks higher over the past 10-years, tighter Fed policy could slow down stock market gains.
Essentially, last week’s price action suggests a looming battle between optimism and fear. These are the ingredients for heightened volatility. Rising rates, domestic political uncertainty, lingering geopolitical risks and upcoming midterm elections may cause investors to step back a little and reassess the current financial market environment. Although it’s too early to predict a top in the market, we can say that there are signs that we could be in the later stages of the bull market cycle.
Technology stocks have led the major indexes higher this year, and they could fuel any substantial near-term correction. Some analysts are saying that last week’s sharp sell-off in the chipmaker sector was the “canary in the coalmine”. However, further weakness in social media stocks and the “Trillion-Dollar Twins” – Apple and Amazon, could be the major catalysts driving the price action this week.